The ministry of finance (MOF) has announced a Corporate Income Tax will be introduced on or after 1st June 2023. The historic declaration was declared on 31 january 2022 aimed to meet International tax standards followed by other neighbouring Gulf states.
Meeting International standards for tax transparency and preventing harmful tax practices UAE has introduced one of the lowest corporate rates in the world. THE MAIN OBJECTIVES OF CORPORATE TAX (CT) Corporate Tax (CT) is a type of direct tax imposed on net Income or profit of corporations and other entities from their business. For a long period the business world in UAE has enjoyed a zero corporate tax.
However the government has introduced a very low corporate tax rate in the world. The main aim of Corporate Tax in UAE is to cement its position as a leading global hub for business and Investment. From the tax rate it’s evident that it will not have any negative impact for small scale businesses.
The Introduction of Corporate tax accelerates its development and transformation to achieve its strategic objectives. It also helps the UAE to meet International standards for tax transparency. TAX RATES There are three corporate Income tax proposed by Ministry of Finance ? 0% Tax rate on taxable income up to AED 375,000 to support small scale business and startups ? 9% rate on taxable income above AED 375,000 ? A different rate (which has not been announced yet) for large multinationals that generate consolidated global revenues above EUR 750m (c. AED 3.15 bn) in line with the Pillar Two of the OECD Base Erosion and Profit Shifting (BEPS) project. EFFECTIVE DATE The corporate Income tax is expected to apply for fiscal years starting on or after 1 June 2023. SCOPE The new Corporate tax will be applied to all businesses at a tax rate of 9% on taxable income above AED 375,000, that includes commercial industrial and professional ventures. The CIT will be exempted for the extraction of Natural resources which is already a subject for taxation The CIT regime will also apply to individuals to the extent they hold (or are legally required to hold) a business licence or permit to carry out commercial, industrial and/or professional activities in the UAE.
This includes income earned by freelance professionals for activities carried out under a freelance licence or permit. The CIT will also apply to individuals who hold a business license or permit to carry out commercial or Industrial activities in UAE. Income earned from freelance activities under a freelance license is also subject to pay the corporate tax. CIT and Freezones Business ventures in free zones will be subject to CT If it conducts any business with mainland UAE. however corporate tax incentives currently offered to free zone businesses will continue to be honoured, to the extent the free zone business complies with all applicable regulatory requirements and does not conduct business in mainland. UAE Individuals will not be subject to corporate tax on income from employment, real estate, investment in shares or other personal income not related to a UAE trade or businesses EXEMPTIONS ? No corporate tax will apply on foreign investors who do not carry on business in the UAE Corporate tax will apply on the adjusted accounting net profit of the business ?
Free zone businesses that meet all necessary requirements can continue to benefit from corporate tax incentives ? The extraction of natural resources will remain subject to Emirate level corporate ? No withholding tax will apply on domestic and cross border payments ? No corporate tax will apply on capital gains and dividends received by a UAE business from its qualifying shareholdings ? No corporate tax will apply on qualifying intragroup transactions and restructurings If you think the introduction of Corporate income tax can have any impact on your business, then feel free to contact us to get proper advice and guidance. We are one of the top accounting firms in dubai with expert VAT consultants and chartered accountants. Contact us for any clarification regarding accounting,auditing or tax filing